Principles of Marketing

TOPIC 4: PRODUCT PLANNING

Contents:

1. Meaning of Product (Page 93-94)

2. Important Features of a Product (Page 94)
3. Product Life-Cycle (Page 97-100)
4. Product Planning and Development Process (Page 106-
107)
 Meaning of Product (Page 93-94)
 Marketing is one of the vital functions of any business. It involves a large number of
functions. Effective coordination of these functions is often described as Marketing Mix.
 Marketing Mix denotes the combination of various elements, which, in total, constitute a
company’s marketing system. They are often described as four P’s: Product, Price, Place,
Promotion.
 In general usage, a product is any object which has an identifiable physical existence. But
in marketing, the meaning of Product is very wide.
 Product may be a good, service, or just an idea. A product is “all things offered to a
market”.
 In short, a product is the sum total of physical (goods), social (performance like music,
dance, etc..) and psychological (medial advice, financial advice etc.) benefits. The products
for easy identity, will have a descriptive name.
Three distinct concepts in a product
including:
 The Generic Product:
It represents the essential or basic benefit a buyer expects to get from
the product
 The Tangible Product:
It represents the physical entity of the product
 The Extended Product:
It represents the physical entity together with the services it could
render to the users.
Three distinct Extended

concepts in
a product Tangible

Generic

e.g., a warm coat

will protect you
from the cold and
the rain. Think
about cars and
mobile phones?!
 Important Features of a Product (Page 94)

1. Tangibility: it should be perceptible by the touch. An item to be called a product, should have a
tangible character – touch, see, or feel.
2. Intangible Attributes: the product may be intangible, in the form of services, for instance,
banking and insurance services. It is an associated feature. For instance, scooter is a tangible
product and when free servicing is offered by the seller, then the product is not only a tangible
item but also an intangible one.
3. Associated Attributes: such attributes may be, brand, package, warranty etc.
4. Exchange Value: whether the product is tangible or intangible, it should have exchange value
and must be capable of being exchanged between seller and buyer for a mutually agreed price.
5. Consumer Satisfaction: products should have the ability to offer satisfaction to the consumer.
The satisfaction may be with real or/and psychological.
 Product Life-Cycle (Page 97-100)

 A product passes through various stages, until it is finally discontinued

from the market.
 The length of the life-cycle, the duration of each phase and the shape of the
curve may differ from product to product, but the whole life-cycle passes
through certain definite stages.
 The Product Life-Cycle Concept indicates that the product is born or
introduced, grows, attains maturity and the points of saturation in that
market and then, sooner or later, it is bound to enter its declining stage.
 A Product Life-Cycle has the following stages:

1. Introduction: Sales are

starting - infant stage
2. Growth: Rising sales at
increasing rate
3. Maturity: Rising sales at
decreasing rate
4. Saturation: Stable sales
5. Decline: Falling sales – decay
and exit
 1. Introduction Stage.
 In the early stage, when the product is introduced in a market, sales revenue
begins to grow but the rate of growth is very slow.
 Profit may not be there as there is low sales volume, large production and
distribution costs.
 It may require heavy advertising and sales promotion.
 Products are bought cautiously on a trail basis.
 Weaknesses may be revealed and they must be promptly removed.
 Cost of market development may be considerable.
 In this stage, product development design are considered critical.
 2. Growth Stage.
 It is the period during which the product is accepted by consumers and the traders.
 During the growth stage, the rate of increase of sales turnover is very rapid.
 Profits also increase at an accelerated rate
 In spite of competition, it may have rising sales and profits.
 The firm gives top priority to sales volume and quality maintenance may have secondary
preference.
 For marketing success, manufacturing and distribution efficiency are vital factors.
 In this stage, effective distribution and advertising are considered as key factors.
 3. Maturity Stage.
 During this stage, keen competition brings pressure on prices.
 Increasing marketing expenditure and falling prices (in the battle of market
share) will reduce profits. Additional expenditure is involved in product
modification and improvement or broadening the product line.
 Marketers have to adopt measures to stimulate demand and face competition
through additional advertising and sales promotion.
 Overall marketing effectiveness becomes the key factor in the stage of
maturity.
 4. Saturation Stage.
 The saturation point occurs in the market when all potential buyers are using
the product and we have only replacement sales.
 Consumption achieves a constant rate and the marketers have to concentrate
exclusively on a fight for market share (with higher marketing expenses).
 Pricesmay fall rapidly and profit margins may become small unless the firm
makes substantial improvement and realizes cost economies.
 5. Decline Stage.
 Once the peak or saturation point is reached, product inevitably (unavoidably)
enters the decline stage and becomes obsolete.
 It may be gradually displaced by some new innovation.
 Sales drop severely, completion dwindles, and even the product cannot stand
in the market.
 At this stage, price becomes the primary weapon of competition and it is
necessary to reduce considerable expenditure on advertising and sales
promotion.
 Cost control becomes the key to generate profits.
Product Planning and Development Process (Page 106-
107)

 There are seven steps in the planning and development of a new product:
1. New product ideas.
2. Ideas screening.
3. Concept development and testing.
4. Business analysis.
5. Product development program.
6. Test marketing.
7. Commercialization.
 1. New product ideas:

 We visualize the detailed features of a model product.

 Ideasmay be contributed by scientists, professional designers, rivals,
customers, salesforce, top management, dealers, etc.
 2. Ideas screening:

 We have to evaluate all ideas and inventions .

 Poor or bad ideas are dropped and through the process of
elimination, only most promising and profitable ideas are picked up
for further detailed investigation and research.
 3. Concept development and testing:

 All ideas that survive the process of screening will be studied in detail.
 They will be developed into mature product concepts.
 At this stage, we can incorporate consumer meaning into our product ideas.
 Concept testing helps the company to choose the best among the alternative
product concepts.
 Concept testing: Consumers are called upon to offer their comments on the
precise written description of the product concept (the attributes and expected
benefits).
 4. Business analysis:

 Once the best product concept is picked up, it will be subjected to be

evaluated in terms of its market potential, capital investment, rate of
return capital, etc.
 Business analysis is a combination of marketing research, cost-
benefit analysis and assessment of competition.
 Business analysis will prove the economic prospects of the new
product concept.
 5. Product development program:
 There are three steps in this stage,
1. Prototype development giving visual image of the product
2. Consumer testing of the model or prototype,
3. Branding
4. Packaging and labelling
 Consumer testing of the model products will provide the ground for
final selection of the most promising model for mass production and
mass distribution.
 6. Test marketing:
 Entire product marketing program is tried out for the first time in a
small number of well-selected test markets
 Testmarketing is necessary to find out the viability of full marketing
program for national distribution.
 Customer reactions can be tested under normal market conditions.
 Ithelps the company to learn through trial and error and get additional
valuable clues for product improvement and for modifications in the
marketing mix.
 7. Commercialization:
 Once the test marketing gives green signal for the product with
or without expected modifications, the company can proceed to
finalize all features of the product.
 Mass production will start and all distribution channels will be
duly organized.
 The product is now born and it will start its life-cycle.